The long-anticipated Canada tariffs have finally taken effect, with rates ranging from 15% to 50% on a wide range of products. Michigan and Ohio are particularly affected, which could fuel a deal to come sooner than expected, given the proximity to the midterm elections. Meanwhile, Prime Minister Carney is set to speak to the European Union on September 17 to strengthen trading ties with other partners. The USDCAD exchange rate is down slightly, but CAD forward rates remain higher due to a more hawkish BoC than expected. Volatility in ATM tenors is relatively flat, except for the (1y/6m) ratio at 1.08, which is above its 1-year average.

The implementation of these tariffs could have significant implications for both Canada and the United States. For Canada, it may lead to increased costs for certain products and potentially impact their competitiveness in the global market. For the US, it could result in higher prices for imported goods and potentially fuel inflation. The impact on the midterm elections cannot be overstated, as this issue has been a major point of contention between the two countries. With Prime Minister Carney’s upcoming speech to the European Union, there may be renewed efforts to strengthen trading ties with other partners and lessen the blow of these tariffs.

The USDCAD exchange rate has taken a slight hit due to the implementation of these tariffs, but CAD forward rates remain higher than usual due to a more hawkish BoC than expected. The (1y/6m) ratio is particularly notable, sitting at 1.08, which is above its 1-year average. This could be an indication that investors are pricing in the potential for higher interest rates in Canada in the near future.

Overall, the implementation of these tariffs has significant implications for both Canada and the US, and their impact on the midterm elections will be closely watched. With Prime Minister Carney’s upcoming speech to the European Union, there may be new developments in the trade relationship between Canada and other partners, which could have a bearing on the tariffs and their potential impact.